Analyses of recent proposals to change the tax preferences for employment-based 401(k) retirement programs have often assumed status quo in plan design (by plan sponsors) and contribution flows (by both individual participants and employers) in response to those changes.

Surveys of both individual participants and plan sponsors suggest, however, that some would change—and in many of those cases, reduce—their contributions. Recent surveys of plan sponsors also suggest that not only would some matching contributions be changed in response, but that some employers would cease offering these retirement plans altogether.

Smaller employers were more likely to respond negatively to the proposed changes than larger employers.

EBRI baseline analysis indicates that plan-sponsor modifications, combined with individual participant reactions, would result in an average percentage reduction in 401(k) balances of between 6-22 percent at Social Security normal retirement age for workers currently ages 26-35.

These responses are strongly tied to plan size; EBRI baseline simulations show that 401(k) plans with less than $10 million in assets would experience average reductions in participant balances at retirement age of between 23-40 percent (depending on plan size and income quartile) for workers currently ages 26-35.

Trends in Health Coverage for Part-Time Workers

One of the concerns about enactment of the Patient Protection and Affordable Care Act (PPACA) in 2010 is that the law’s health coverage mandate for full-time workers (for employers with 50 or more workers) will cause cutbacks in coverage to part-time workers (in order to control costs) or an increase in the use of part-time workers.

The recent recession has already resulted in an increased use of part-time workers, fewer employers are offering health coverage to part-time workers, and there has been a slight drop in the percentage of part-time workers with coverage from their own employer. While since 1999, there has been no clear trend away from offering coverage to part-time workers either among small or large employers, between 2009 and 2011 the percentage of small employers offering health coverage to part-time workers fell from 30 percent to 15 percent.